-tC sr..- 3-' 

i- n p:+ { .l UNITED STATES ENVIROt.I;vIENTAL PROTECTION AGENCY 

r, . ..- +'+c -,,~t- WAShIidGTO?:. D C 20466 

April 17, 1989 OFFICE OF 

LENERAL COUNSEL 

SUBJECT: Justice Department Opinion on CFC Auction and Fees 

FROM : Gerald H. Yamada 

Acting General c 

i. 

William K. ~eid~ ! 

Administrator L 

In response to a request from OMB, the Office of Legal 

Counsel of 'the Department of Justice (OLC) has issued an opinion 

concluding that EPA has authority under the Clean Air Act (CAA) 

to regulate CFCs by means of an auction or fee. 

OLC says that the grant of regulatory authority under CAA 

section 157(b)--authorizing "regulations for the control [of 

CFCs]" on its face authorizes an auction or fees. Moreover, 

even if section 157(b) were ambiguous, EPA's broad discretion in 

interpreting the Clean Air Act would allow an auction or fees. 

OMB further asked for OLC's opinion on whether the 

Independent Offices Appropriations Act (IOM) and the Toxic 

Substances Control Act (TSCA) authorize an auction or fee. 

Because the CM provides authority, OLC declined to address 

whether these other statutes provide authority. 

A copy of the OLC opinion is attached. 

Attachment 
(J.S. f)epartn~ertt of Jusricc 

Ot'ticc ot' Legal Courtst.1 

Office of the 

Assiscant Attorney General 

Washinglon. D.C. 20530 

April 14, 1989 

MEMORANDUM FOR ALAN RAUL 

General Counsel 

Office of Management and Budget 

This is in response to your request for our opinion on 

whether the EPA has statutory authority to allocate production 

and consumption privileges for chloroflurocarbons and halons 

("CFC") through an auction or other market pricing mechanism, 

such as a regulatory fee. You have suggested three possible 

sources of statutory authority for such action by EPA, provisions 

of the Independent Office Appropriation Act of 1952 ("IOAA"), 

31 U.S.C. 9701, the Clean Air Act, 42 U.S-C. 7457, and the Toxic 

Substances Control Act, 15 U.S.C. 2605. 

For the reasons that follow, we conclude that EPA has 

authority under the Clean Air Act to allocate production 

privileges for CFCs through an auction or quota with regulatory 

fees. ~ecause'~~~ has this authority under the Clean Air Act, we 

do not resolve the issue of whether EPA also possesses the 

authority under the IOAA or the Toxic Substances Control Act.I 

You also appeared to reqtiest that we generally address the 

issue of whether the IOAA authorizes an agency, acting in its 

governmental or sovereign capacity, to charge a fee for a benefit 

that exceeds the cost to the agency of granting the benefit. We 

do not resolve this issue here, largely because we believe that 

this question will rarely be able to he analyzed in the abstract, 

apart from an administrative agency's organic statutes. For 

instance, in this case it would be an essential predicate to 

finding authority under the IOAA that EPA have authority under 

the Clean Air Act or other organic statute to issue CFC 

allowances and make them transferable, thus creating a thing of 

value for which a fee may potentially be charged. On the other 

hand, the IOAA itself would be essential to upholding EPAfs 

authority to sell CFC allowances for value only if its organic 

statutes, such as the Clean Air Act, were consistent with charges 

for value but did not themselves authorize such charges. 

Accordingly, while'we believe it may be useful in other contexts 

to use the IOAA to supplement an agency's statutory authority, 

that is unnecessary here in light of EPAfs ability to interpret 

ambiguities or silence in its organic ~tatute~s in a manner that 

will advance a chosen regulatory initiative, such as charging for 

items of value. See Chevron v. Natural Resources Defense 

(continued ...) 
I. Background 

On September 12, 1988, EPA issued a final rule ("rule" or 

"existing rule") , which took effect January 1, 1989, limiting the 

amount of certain chloroflurocarbons and halons that can be 

produced, imported or exported by United States firms.2 53 Fed. 

Reg. 30566 (1988) (to be codified at 40 C.F.R. Part 82). The 

rule implements the Montreal Protocol on Substances that Deplete 

the Ozone Layer, which has been ratified by the United States. 

26 I.L.M. 1541 (1987). In conformity with the Montreal Protocol, 

the rule limits the total production and consumption3 of CFCs of 

the United States to their 1986 levels.4 At present the 

mechanism chosen by EPA to realize these limits is a prohibition 

on the production of CFCs without the possession of an allowance 

or right, and a restriction to 1986 levels on the amount of CFCs 

that are authorized by allowances. The allowances are then 

distributed to firms based on the amount of the firm's CFC 

production in 1986. EPA plans to issue regulations authorizing 

the sale of allowances. As discussed below, however, EPA 

specifically left open the possibility of issuing modifications 

to the quota system, including the introduction of an auction 

system to allocate allowance^.^ 

l(...continued) 

Council, 467 U.S. 837 (1984). We do, however, provide for your 

information a suggested framework'of analysis for the IOAA. 

2~lthough the rule covers both chloroflurocarbons and 

halons, we will refer to them jointly as CFCs. 

3~or ease of exposition, we will refer to the consumption 

and production of CFCs jointly as "the production of CFCs." 

4~o be more precise, under the Montreal Protocol 

chloroflurocarbons are frozen initially at 1986 levels. 

Chloroflurocarbons are to be reduced to 80 percent and 50 percent 

of 1986 levels by July 1, 1993 and July 1, 1998, respectively. 

See 53 Fed. Reg. 30566 (Aug. 12, 1988). Moreover, halons are to 

be frozen at 1986 levels beginning on January 1, 1992. 

Further, the Montreal Protocol allows limited production, but not 

consumption, increases and for rationalization to take account of 

international transfers of CFCs. 53 Fed. Reg. at 30587, 30581- 

83, 30589. For purposes of exposition, we shall generally ignore 

these complications in the text, and refer to the CFC 

restrictions as simply requiring CFCs to be reduced to ;986 

levels. 

5~3 Fed. Reg. 30604 (August .12, 1988). 
A principal reason that EPA adopted a system of allocated 

allowances or quotas was that it ensured compliance with the 

levels set by the Montreal Protocol. In contrast to a system of 

regulatory fees (designed to discourage use of CFCs), engineering 

controls or bans on selected products or types of CFCs, the 

system of allocated quotas permits EPA to control the amount of 

CFCs that are lawfully used with certainty. The alternative 

methods risk the United States, failure to comply with the 

Montreal Protocol. 6 

' During the rulemaking process, EPA also considered issuance 

of two modifications of the system of allocated quotas, which 

also ensure certainty in the control of CFCS.~ First, EPA 

discussed the imposition of a regulatory fee in addition to the 

allocated quota system. EPA considered whether the fee is 

necessary to prevent CFC producers from receiving a windfall in 

the form of a price increase for products which require CFCs. 

The price of such products might increase if the demand for them 

rises but the supply is limited due to restraints on the 

production of CFCs. EPA is considering whether the resulting 

windfall to CFC producers would lead them to delay the 

introduction of CFC substitute^.^ Such a delay would cause 

several harmful effects, including increasing the cost of future 

required reductions in CFC production and discouraging developing 

nations from joining the Montreal Protocol. 

Second EPA also discussed the use of an auction to allocate 

allowances. Instead of allocating allowances based on a f inn's 

1986 CFC production, an auction would be held in which all 

persons could bid for the allowances. An auction would 

eliminate the possibility of a windfall to CFC producers, and 

would also serve economic efficiency by allocating the allowances 

to firms which placed the highest value on their use. Under both 

the auction and the combination of quotas with regulatory fees, 

the money received by EPA would be placed in the United States 

Treasury pursuant to 31 U.S.C, 3302. 

653 Fed. Reg. at 30576-79. 

753 'Fed. Reg. at 30576-79; 53 Fed. Reg. 30604-11. 

8~~~ bases the fear of a delay in the introduction of CFC 

substitutes on the fact that the principal researchers for the 

substitutes are also producers of CFCs. Moreover, the 

researchers are joined in a consortium, which might permit them 

collectively to d'elay research progress to maintain increased 

profits from CFCs. 53 Fed. Reg* at 30606. 

953 Fed. Reg. 30606-11 (1988). 
11. Analysis 

A. Allocatins CFC Allowances under the Clean Air Act 

The issue presented is whether.EPA possesses the legal 

authority under the Clean Air Act to establish an auction system 

or a quota with fees for the allocation of allowances. We 

believe that EPA has this authority under Section 157(b) of the 

Clean Air Act. Section 157 (b) , 42 U.S.C. 7457 (b) , authorizes 

without limitations the imposition of "regulations for the 

control of [a] substance" which the Administrator has determined 

to affect the stratosphere and endanger public health. Both an 

auction and a system of regulatory fees fits within the plain 

meaning of this authority because they operate to reduce the 

supply of a substance. Moreover, even were EPAfs authority in 

this area less sweeping or more ambiguous, the deference 'due to 

an agency's reasonable construction of its administrative statute 

would also militate in favor of upholding an auction system or 

quota with fees. That Congress did not specifically consider and 

endorse such methods of substance control is no argument that EPA 

may not choose such a method. It is a basic axiom of 

administrative law'that Congress in order to address a complex 

problem may delegate to an agency authority broad enough to 

fashion solutions that Congress itself did not endorse or 

consider. 

Section 157 (b) of the Clean Air Act, 42 U.S.C. 7457 (b) , provides the Administrator with specific regulatory authority to 

control substances that might endanger public health by affecting 

the ozone layer. Section 157 states: 

the Administrator shall propose regulations 

for the control of any substance, practice, 

process, or activity (or any combination 

thereof) which in .his judgment may reasonably 

be anticipated to affect the stratosphere, 

especially ozone in the stratosphere, if such 

effect in the stratosphere may reasonably be 

anticipated to endanger public health or 

welfare. Such regulations shall take into 

account the feasibility and the costs of 

achieving such control. . . . From time to 

time, and under the same procedures, the 

Administrator may revise any of the 

regulations submitted under this subsection. 

This -section was added by the Clean Air Act Amendments of 1977, 

which enacted Part B of Subchapter 1 of the Clean Air Act. 42 

U.S.C. 7450-59, Part B provides for various studies and research 

on ozone conditions. 
The plain language of Section 157(b) indicates that the 

Administrator may allocate the allowances to produce CFCs through 

either an auction or the combination of allocated quota and 

regulatory fees. Both an auction and a quota with fees clearly 

fall within the meaning of a "regulation[] for the control of [a] 

substanceN which the ~dministrator has determined to affect the 

stratosphere and endanger public health. In both cases, the 

proposed regulation attempts to restrain, but not prohibit, the 

production of CFCs. 

This point can be made clearer by distinguishing the two 

parts of the proposed regulations. The first part limits 

collective CFC production by restricting allowances to the amount 

set in the Montreal Protocol. This cap on CFC production clearly 

involves "the control of" CFCs. Moreover, the cap is superior to 

alternatives (such as regulatory fees, engineering controls or 

selective bans) in that it permits the EPA to specify the exact 

amount of lawful CFC production. The cap also enables EPA to 

ensure conformity with the Montreal Protocol. EPA has chosen to 

exercise its regulatory discretion to conform CFC production to 

the Protocol and United States' international obligations, and 

the cap serves this goal'with more certainty than the 

alternatives.1° 

The second part of the regulations involve the allocation of 

the allowances -- either through an auction or on historical 

grounds with additional fees. Once the decision has been made to 

cap the production of CFCs with allowances, a method for 

allocating the allowances is necessary. Auctions and 

historically based allocations (with or without additional fees) 

merely constitute different methods of allocating the allowances. 

Under the existing rule of'allocated quotas, the allowances are 

distributed on historical grounds, and then are to be made 

transferable. In effect, the existing rule chooses to make a 

gift of the allowances to firms which have produced CFCs in the 

past. l1 Under the auction, in contrast, the allowances are sold 

to those firms which value them the most, Finally, under the 

queta with fee approach, the allowances are given to firms on 

historical grounds, but then a fee (set at the predicted increase 

lO~he Clean Air Act specifically encourages international 

cooperation concerning the control of substances harmful to the 

ozone. Section 156, 42 U.S.C. 7456, encourages the President "to 

enter into international agreements . . . to.develop standards 

and regulations which protect the stratosphere consistent with 

regulations applicable within the United States." 

l1 Thus, rewarding firms to the extent they have previously 

produced CFCs. 
in the price of CFC products resulting from the restriction on 

CFCS)~~ would be imposed to extract any windfall conferred on 

allowance recipients. All of these allocation approaches fall 

within the language of the statute conferring authority on the 

EPA to issue regulations "for the control of" CFCs. 

The auction and quota with fee rules are also consistent 

with the statutory requirement in section 157(b) that the 

regulations "take into account the feasibility and the costs of 

achieving . . . controlN over CFCs. First, every restriction on 

CFCs will impose some cost on producers. We very much doubt that 

the limits imposed by the Montreal Protocol are so restrictive 

that they could be said to conflict with the language of section 

157(b). Moreover, even assuming the auction and quota with fee 

rules will impose greater costs on CFC producers than another 

method of control, EPA could conclude that these charges better 

serve the primary health purpose of controlling CFCs. Under the 

statute, EPA must consider costs, it need not have its control 

decision determined by this factor. This is especially true, of 

course, if the EPA believes the greater cost does not outweigh 

the control benefit. l3 As the House Committee Report stated: 

the committee intends to assure that any 

[stratosphere protection measure] is 

undertaken only with adequate awareness ot 

its costs and its other economic impacts and 

social impacts. . . . [I]n light of the 

primary purpose of protecting public health 

1253 Fed. Reg. at 30608-10. 

l3 EPA could reasonably conclude that the auction and quota 

with fee rules better advance the statutory aims for a number of 

reasons. First, these rules are theoretically superior to a 

historical allocation in controlling CFCs. By eliminating the 

windfall to CFC producers created by the historical allocation, 

the auction and quota with fee rules may lessen the incentive of 

producers to delay the introduction of CFC substitutes. 

Similarly, the economic incentive of a fee may be assumed to 

encourage producers to develop CFC substitutes. The existence of 

CFC substitutes decreases the demand for CFC production and, as 

noted above, increases the chances that nations not parties to 

the Montreal Protocol will reduce their CFC production. Second, 

the auction and quota with fee rules arguably lower social costs, 

because an historical allocation is more likely to reward an 

inefficient producer than either the auction or quota with fee 

system. Further, the rules may also be implemented at less cost 

to the government. 'EPA presumably avoids the difficulty of 

prescribing and monitoring a firm's technological processes, and 

instead simply focuses on the amount of CFCs produced by 

different firms. 
and assuring a habitable environment, the 

committee does not wish to tie the 

Administrator's hands or confer an authority 

which is cumbersome or unduly difficult to 

use, administer, or enforce. Therefore, the 

committee has required only that a costbenefit, cost-risk or cost-effectiveness 

analysis be performed. 

H.R. Rep. No. 294, 95th Cong.., 1st Sess. 101 (1977). 

Second, EPA could reasonably conclude that firms will be 

able to feasibly comply with the auction and quota with fee 

rules. In both cases, there is no requirement that any 

particular production process be employed. Rather, the firms are 

given substantial flexibility in complying with the limits on 

CFCs. Within the supply available, there would not appear to be 

restrictions on the number of allowances that a firm may 

purchase, and the firms may choose not to emit CFCs and develop 

CFC alternatives. 

Given the clear application of the statutory language to the 

auction and quota with fee rules, we believe that the plain 

meaning rule resolves the matter. If the words of a statute are 

clear, then the plain meaning of a statute ought to be followed 

unless it leads to conclusions-that are absurd or clearly 

contrary to the manifest purpose of the statute. See United 

States v. Bryan, 339 U.S. 323, 338 (1950); United States v. 

Brown, 333 U.S. 18, 26 (1948); United States v. Wiltberser, 18 

U.S. 76, 96 (1820) (Marshall, C.J.). Here, there can be no 

argument that the plain meaning leads to conclusions that require 

modification of the statute. Rather, the auction and quota with 

fee rules are options that EPA considers to have many desirable 

features for limiting CFC production at a reasonable cost. 

It cannot be seriously argued that the use of economic 

incentives to regulate pollution is a novel or strange idea that 

could not have been anticipated by the authors,of the Clean Air 

Act Amendments. The idea of using economic methods to regulate 

pollution has been widely discussed and advocated in the policy 

literature in recent decades, including for many years before the 

Clean Air Act Amendments were passed in 1977. See, e.g., J. 

Dales, Pollution, Propertv & Prices (1968) (advocating the 

government sale of transferable pollution rights); E. Mishan, The 

Costs of Economic Growth (1967); A. Kneese and B. Bower, Manasinq 

Water Quality: Economics. Technoloqv, Institutions (1968); 

Environmental Quality-The Second Annual Report of the Council on 

~nvironmental Quality 136-138 (1971) ; Environmental Law 

Institute, Efficient Charses on Air and Water Pollution (1973) 

(Report on 1971 Conference concerning desirability of effluent 

charges). 
Indeed, other provisions of the Clean Air Act Amendments 

reveal that Congress was aware of economic methods of regulation 

and even employed them for certain purposes- Section 120 of the 

Amendments provides for the imposition of a noncompliance penalty 

on certain stationary sourc'es, and the penalty is based on the 

economic value to the source of noncompliance. 42 U.S.C. 7420. 

Section 405 of the Amendments directs the Administrator to 

undertake a study as to economic measures that could strengthen 

the effectiveness of existing methods of air pollution control. 

42 U.S.C. 7401 (note). It is thus clear that Congress was 

cognizant of economic forms of regulation, did not prohibit them, 

but instead used general language permitting a wide scope of 

regulatory measures for the control of CFCs. l4 

There is also nothing in the legislative history to indicate 

that the plain language of section 157(b) should be narrowed. 

The relevant discussion of section 157(b) in the principal 

committee report emphasizes that the Administrator's regulatory 

"authority should be exercised with the primary purpose of health 

protection in mind." H.R. Rep. No. 294, 95th Cong., 1st Sess. 

102 (1977). The report also states in a footnote that 

ff'controls' may include design standards, work practice 

standards, prohibitions, and/or such other measures as may be 

necessary to assure protection for health and environment and to 

protect the stratosphere." Id. n. 2. This language is 

consistent with the auction and quota with fee rules. The rules 

constitute "other [necessary] measures" and possibly 

"prohibitions1' as well. l5 

l4 As the text indicates, we do not believe that Congressf 

legislation of an economically based noncompliance penalty or its 

requirement of a study of economic methods of regulation suggest 

that the Clean Air Act denies by implication the auction or quota 

with fee rules. Rather, that Congress employed economic methods 

under section 120 indicates, if it indicates anything more than 

the'text suggests, that Congress approved of such methods. 

Moreover, that Congress in 1979 chose to study economic methods 

under section 405 (rather than to expressly enact them) does not 

suggest that it deprived the Administrator of authority to use 

such methods under 157(b). Congress creates administrative 

agencies in part because it lacks expertise sufficient to fashion 

a solution to the regulatory problems at issue, see American 

Truckins Assoc. v. United States, 344 U.S. 298, 309 (1953), and 

thus Congress will typically avoid precise specification of an 

agency's authority. 

151t might be contended that the evolution of section 157(b) 

suggests that economic methods were excluded. The original 

version of the section would have banned CFCs from certain 

sources and subsequent discussions of the section did not refer 

(continued ...) 

-8- 
An interpretation of section 157(b) that would deny 

authority to regulate through economic methods would in effect 

rewrite the statute to read that "the Administrator shall [issue] 

regulations for the control [of CFCs] bv traditional command and 

control or specification standard methods." Such rewriting is 

unwarranted in any case, but especially so where Congress was 

aware of economic methods of control and where such methods so 

ably serve the underlying purposes of the statute in the judgment 

of EPA. Moreover, such a crabbed reading of the statute might 

well invalidate the interim allocated quota rule. Although it 

does not charge recipients for their allowances, the quota rule 

nonetheless departs from traditional methods permitting 

allowances to be transferred and creating a market in 

allowances. l6 

Even if the language of section 157(b) were not plain, 

however, it is still clear that the Administrator would be able 

to issue either the auction or quota with fee regulations. 

First, the Supreme Court has long held that regulatory statutes 

are to be interpreted broadly to further the purposes of the 

delegation. In American Truckinq Assoc. v. U.S., 344 U.S. 298 

(1953), the court1/ explained: 

l5 ( . . . continued) 

to economic methods of control. 7 Congressional Research 

Service, A Legislative History of the Clean Air Act Amendments of 

1977, 7063-7069 (H.R. 3118); a. at 6353, (122 Cong. Rec. 29548 

(Sept. 9, 1976); H.R; Rep. No, 1175, 94th Cong., 2d Sess. 6628. 

We d~ not believe, however, that anything can be inferred from 

the original version of the section. The House.of 

Representatives quite clearly abandoned its original plan to 

prohibit CFCs and instead chose to rely on regulation by the 

Administrator. Moreover, the fact that the discussions of the 

section focused on the methods of regulation most familiar to 

Congress -- and were silent on economic methods of control -- 

cannot be used to narrow the language of the section. There is 

no suggestion that Congress intended these methods to be the 

exclusive fonns of regulation. 

16~.s noted above, EPA has not yet promulgated the section on 

transfers of allowances under the existing allocated quota rule. 

See Section 82.12 

171n' American Truckinq, the Court approved ICC regulations 

on the use by regu1:ated carriers of equipment leased or ' 

interchanged with other carriers. The Interstate Commerce Act 

did'not specifically authorize the ICC to regulate leasing 

practices. Rather, the statute provided the Commission with the 

(continued. . . ) 

-9- 
[Appellants] urge upon us the fact that nowhere in the 

Act is there an express delegation of power to control, 

regulate or affect leasing practices, and it is further 

insisted that in each separate provision of the Act 

granting regulatory authority there is no direct 

implication of such power. Our function, however, does 

not stop with a section-by-section search for the 

phrase "regulation of leasing practices" among the 

literal words of the statutory provisions- As a matter 

of principle, we might agree with appellants' 

contentions if we thought it a reasonable canon of 

interpretation that the draftsmen of acts delegating 

agency powers as a practical and realistic matter, can 

or do include specific consideration of every evil 

sought to be corrected. But no great acquaintance with 

practical affairs is required to know that such 

prescience, either in fact or in minds of Congress, 

does not exist. Its very absence, moreover, is 

precisely one of the reasons why regulatory agencies 

such as the Commission are created, for it is the fond 

hope of their authors that they bring to their work the 

expert's familiarity with industry conditions which 

members of the delegating legislatures cannot be 

expected to possess. 

344 U.S. at 309-10 (citations and footnotes omitted). In 

American Truckinq, the authority found by the Supreme Court was 

much less clear than in the present case. The language of 

section 157(b), unless artificially narrowed providesthe 

Administrator with the requisite authority. l8 The Supreme Court 

applied a similar rule of interpretation in United States v. 

Southwestern Cable Co., 392 U.S. 157, 173 (1968), holding that 

l7 ( . . . continued) 

authority to regulate certain carriers "as-prcvided in this 

chapter." Section 204 (a) (1) and (2) . The Court relied on the 

ICC's general regulatory authority to issue all necessary rules 

for the enforcement and administration of the Act.and on the fact 

that the regulations were "aimed at conditions which may directly 

frustrate the success of the regulation undertaken by Congress." 

344 U.S. at 311. 

l8 In American Truckinq, however, the Supreme Court was 

unable to identify a provision which directly authorized the 

practices., Although the Court cited to a general provision, 344 

U.S. at 311 (citing section 202(a), it was less apparent that it 

was .intended to confer authority on, the Commission, especially 

given the many specific grants of authority in the statute. 

Here, however, the general provision is clearly a grant of 

authority, and it is the only source of regulatory authority. . , 
the FCC had authority to regulate cable television under the 

~ommunications Act because such authority was necessary "to 

perform with appropriate effectiveness certain of its other 

responsibilities. " 

Second, when a statute is ambiguous or silent on an issue, 

the interpretation of the agency entrusted to administer it is 

entitled to considerable deference when reviewed by a court. In 

Chevron v. Natural Resources Defense Council, which involved the 

Administrator's authority under the Clear Air Act Amendments of 

1977, the Supreme Court stated: 

The power of an administrative agency to 

administer a congressionally created program 

necessarily requires the formulation of 

policy and the making of rules to fill any 

gap left, implicitly or explicitly, by 

Congress- If Congress has explicitly left a 

gap for the agency to fill, there is an 

express delegation of authority to the agency 

to elucidate a specific provision of the 

statute by regulation. Such legislative 

regulations are given controlling weight 

unless they are arbitrary, capricious, or 

manifestly contrary to the statute. 

Sometimes the legislative delegation to an 

agency on a particular question is implicit 

rather than explicit. In such a case, a 

court may not substitute its own construction 

of a statutory provision for a reasonable 

interpretation made by the administrator of 

an agency. 

467 U.S. 837, 843-44 (1984) (quotation marks and footnotes 

omitted). See Younq v. Community Nutrition Inst., 476 U.S. 974 

(1986); Commodity Futures Tradinq Comrn'n v. Schor, 478 U.S. 833, 

844-45 (1986); NLRB v. City Disposal Svstems. Inc., 465 U.S. 822, 

830 n. 7 (1984). 

If the language of section 157(b) is read as ambiguous or 

silent as to the issue whether the Administrator may use economic 

methods of regulations, then the Administrator's interpretation 

of the provision, if reasonable, must be approved by a court. 

See Chevron, 467 U.S. at 845. Therefore, the economic 

regulations could only be invalidated if a court determined that 

Congress had clearly limited the Administrator's authority to 
traditional forms of regulation. No such determination is 

possible. l9 

The plain language of the statute also should not be 

narrowed on constitutional grounds. It might be argued that 

auctions and fees constitute taxes, and that the constitutional 

uncertainty of the delegation of the taxing power should lead one 

to interpret section 157(b) not to authorize auctions or fees. 

This argument relies on language in National Cable Television 

Assoc- v. U.S., 415 U.S. 336 (1974),ZC) where the Supreme Court 

narrowed the Independent Offices Appropriations Act "to avoid 

constitutional problems" concerning the delegation of legislative 

power. The Court held that the statutory language conferring 

authority on agency heads to prescribe fees on the basis of the 

"value to the recipient, public policy or interest served, and 

other pertinent facts" should be read to give effect only to the 

"value to the recipient1' standard. The Court drew a distinction 

between taxes and fees: when imposing taxes, the government might 

arbitrarily disregard benefits bestowed, and rely on ability to 

pay, but when imposing fees, the government must use the standard 

of benefit to the recipient. The Court then stated that it 

''would be a sharp break with our traditions to conclude that 

Congress had imposed on a federal agency the taxing power." 

19~hus, if EPA adopts the interpretation of section 157(b) 

articulated here in promulgating either the auction or quota with 

fee rules, then this interpretation would be entitled to 

deference. Based on its discussions of the statutory authority, 

we do not understand EPA to have adopted a firm interpretation of 

section 157(b). Rather, we understand EPA to advocate an auction 

or quota with fee, and simply to have been uncertain whether the 

courts would uphold its authority to issue the rules. See 53 

Fed. Reg. 30605-08, 30611-14; letter to Douglas W. Kmiec, 

Assistant Attorney General, Office of Legal Counsel, U.S. 

Department of Justice from Gerald H. Yamada, Acting General 

Counsel, Environmental Protection Agency (March 17, 1989). 

Even if EPA had previously adopted a narrow interpretation of 

section 157(b), however, it could still change its interpretation 

and be accorded deference by the courts. See Chevron, 467 U.S. 

at 863 (that EPA "has from time to time changed its 

interpretation of [a statutory term] does not . . . lead us to 

conclude that no deference should be accorded the agency's 

interpretation of the statute. An initial agency interpretation 

is not instantly carved in stone. On the contrary, the agency, 

to engage in informed rulemaking, must consider varying 

interpretations. ") 

. . 

*Osee also FPC v. New Enqland Power Co'., 415 U.S. 345 (1974) 

(companion case to National Cable Television). 

- 12 - 
415 u.S. at 341. Moreover, the Court also discussed J.W. Ham~ton 

& co. v. United States, 276 U.S. 394 (1928) and Schecter Cor~. V. 

United States, 295 U.S. 495, 529 (1935), which required Congress 

to "lay down an intelligible principle" when delegating authority 

to the executive, and stated that "the hurdles revealed in those 

decision lead us to read the [IOAA] narrowly to avoid 

constitutional problems." - Id. at 342. 

We reject any argument that the Clean Air Act need be read 

narrowly to avoid an unconstitutional delegation in this context. 

First, we question whether Congress is precluded from delegating 

its taxing power, subject only to the same constraints as are 

imposed on delegations of its other legislative powers.21 In 

both cases, if the delegation is constitutional, it is because 

the executive is sufficiently constrained by statutory standards 

that it does not truly exercise legislative power. The Supreme 

Court has stated this position in upholding the delegation of the 

taxing power, In J.W. Ham~ton & Co. v. United States, the 

Supreme Court approved a delegation to the President to increase 

custom duties: 

It is conceded by counsel that Congress may use 

executive officers in the application and enforcement 

of a policy declared in law by Congress, and authorize 

such officers in the application of the Congressional 

declaration to enforce it by regulation equivalent to 

law. But it is said that this never has'been permitted 

to be done where Congress has exercised the power to 

levy taxes and fix customs duties. The authorities 

make no such distinction- The same principle that 

permits.Congress to exercise its rate making power 

in interstate commerce, by declaring the rule which 

shall prevail in the legislative fixing of rates, and 

enables it to remit to a rate-making body created 

in accordance with its provisions the fixing of such 

rates, justifies a similar provision for the fixing of 

customs duties on imported merchandise. If Congress 

shall lay down by legislative act an intelligible principle 

to which the person or body authorized to fix such rates 

is directed to conform, such legislative action is not 

a forbidden delegation of legislative power. 

This is not to concede that the auction price or quota 

with fee would constitute a tax. Quite the contrary, since 

arguably any price set by market forces, or premised on market 

values, would reflect the benefit to the purchaser or recipient 

of the allowance, rather than any tax calculation based on such 

entity's ability to pay. See also text, infra. 
Harn~ton, 276 U.S. at 409.~~ Moreover, the D.C. Circuit, relying 

on Hampton, has also recently held that there is no per se rule 

against delegation of the taxing power. Florida Power & Liqht 

Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988)." 

Furthermore, National Cable Television is better read as 

limiting the IOAA to avoid an excessive delegation of power 

generally, rather than as.proscribing delegation of the taxing 

power. Florida Power & Liaht Co. v. United States, 846 F.2d 765 

(D.C. Cir. 1988). This interpretation, which was recently 

adopted by the D.C. Circuit, views the "constitutional problemsn 

that are avoided by narrowly interpreting the IOAA as excessive 

delegation problems and not delegation of taxing power problems. 

This interpretation has the virtue of explaining the prominent 

reference to J.W. Ham~ton & Co. v. United States and Schechter 

Poultrv v. United States in National Cable Television. If the 

Supreme Court meant to suggest the problematic nature of 

delegations of the taxing power, it is hard to imagine why it 

would cite to the one prior Supreme Court case implying that 

delegations of the taxing power are not a special problem. 

Similarly, National Cable Television's reference to 

Schechter Poultrv, which did not even involve taxes, suggests 

that the Court was concerned with the adequacy of the dele ation 

under general principles. Florida Power, 846 F.2d at 774. 94 

22~oreover, it is clear from the opinion that the Court 

considered the statute as involving the.taxing power rather than 

the foreign commerce power even though one of the purposes stated 

in the statute was "to regulate the foreign commerce of the 

United States." In response to the argument that it is 

unconstitutional to set customs duties for any purpose in 

addition to raising revenue, the Court stated that "So long as 

the motive of Congress and the effect of its legislative action 

are to secure revenue fdr the benefit of the general government, 

the existence of other motives in the selection of the subjects 

of taxes can not [sic] invalidate Congressional action." 276 

U.S. at 412. 

23~s the D.C. Circuit stated, Florida Power & Liqht, 846 

F.2d at 775, Hamwton continues to be good law. Indeed, it is 

one of the classic delegation citations. See, e.q., Mistretta v. 

United States, No. 87-7028 (Jan. 18, 1989). 

24~he interpretation is also supported by the definition of 

the taxing power articulated in'Nationa1 Cable ~elevision as the 

power to choose between imposing charges on the basis of ability 

to pay or on benefit to the recipient. Because this definition 

is not the constitutional definition of a tax, it is unlikely 

that the Court was stating that there were constitutional 

(continued. . . ) 
This interpretation of National Cable Television is also 

supported by the Supreme Court's recent citation of the case.for 

the proposition.that "In recent years, our application of the 

nondelegation doctrine principally has been limited to the ' 

interpretation of statutory texts, and, more particularly, to 

giving narrow constructions to statutory delegations that might 

otherwise be thought to be unconstitutional." Mistretta v. 

United States, No. 87-7028 (slip op. at 12-11. 7) (Jan. 18, 

1989) .L' 

Under fair interpretation, National Cable Television does 

not support a narrow interpretation of section 157(b). In 

addition, the plain meaning interpretation of section 157(b) 

clearly satisfies the requirements of the non-delegation 

doctrine, as stated in J.W. Hampton and Schechter Cor~. Section 

157(b) sets the purpose of the regulation as controlling 

substances that might endanger public health by affecting the 

ozone layer. Moreover, the singular character of this purpose 

sewes to heighten the limitations it imposes on the 

Administrator's discretion. The section also imposes a 

constraint on the Administrator's choice of the means of control 

-- the Administrator must take into account feasibility and 

costs.26 Thus, section 157(b) provides defined limitations on 

the regulatory methods chosen by the Administrator. The section 

certainly provides "an intelligible principle"27 by which the 

courts may determine whether or not the Administrator has chosen 

one of the permissible means available to him of controlling 

harmful substances. The courts will have more guidance here than 

under other delegations approved by the Court, see Federal Power 

Commfn v. HOD^ Natural Gas Co., 320 U.S. 591, 600 (1944) 

(upholding delegation to determine just and reasonable rates); 

National Broadcastina Co. v. United States, 319 U.S. 190, 225-26 

24 ( . . . continued) 

problems that needed to be avoided whenever Congress delegated 

its'taxing power. Rather, the reference to the broad range of 

the choice conferred is consistent with a concern about excessive 

delegation generally. 

25~n addition to citing National Cable Television, the Court 

also cited Industrial Union Dept. v. American Petroleum 

Institute, 448 U.S. 607 (1980), a delegation case that did not 

involve taxation. 

26~he section also permits the Administrator to exempt 

"medical use products for which . . , there is no suitable 

substitute." 42 U.S.C, 7457(b). 

27~.~. Hampton & Co. v. United States, 276 U.S. 394, 409 

(1928). 
(1943) (upholding delegation to regulate broadcast licensing Itas 

public interest, convenience, or necessity" require), and 

substantially more guidance than under the IOAA's broad grant of 

authority (prior to the decision in National Cable Television) to 

set fees on the basis of "value to the recipient, public policy 

or interest served, and other pertinent facts." 415 U.S. at 

341.28 

Second, even if there was uncertainty ~oncerning Congress1 

power to delegate the taxing power, that should not lead to a 

narrowing interpretation of section 157(b) because the Clean Air 

Act is enacted generally under the commerce power, not the taxing 

power. Regulatory actions by the EPA under section 157(b) are 

also supported by the commerce clause, and this includes rules 

that would require auctions or quotas with a fee, Moreover, it 

is particularly difficult to argue that an auction constitutes a 

tax because it is the market, and not the government, that 

determines the amount that is to be collected. We are not aware 

of a previous argument asserting that any of the other auctions 

conducted by the government constituted taxes. 

The Supreme Court has long held that impositions of some 

duties and fees are not exercises of the taxing power but may be 

justified by other provisions, such as the commerce clause. In 

the Head Money Cases, 112 U.S. 580, 595-96 (1884), the Supreme 

28~or can it be argued, based on National Cable 

Television, that the delegation in section 157(b) "would be a 

sharp break with our traditions." As demonstrated below, the 

power to employ auctions or quotas with fees does not constitute 

the taxing power, but rather the use of economic methods to 

regulate commerce, and such methods have been frequently 

employed. See Head Money Cases, 112 U.S. 580, 596 (1884); Wickard 

v. Filburn, 317 U.S. 111 (1942); South Carolina v. Block, 717 

F.2d 874, 887 (4th Cir. 1983, cert. denied, 465 U.S. 1080 (1984); 

United States v. Stansland, 242 F.2d 843 (7th Cir. 1957); Rodqers 

v. United States, 138 F.2d 992 (6th Cir. 1943). Moreover, 

discretion by the executive in the application of such methods is 

also not novel. See South Carolina v. Block, 717 F.2d at 887 

(provision conferring discretion on Secretary of Agriculture 

whether to deduct for regulatory purposes a specified amount from 

the proceeds of milk sales to offset cost of the price support 

program). See also J.W. Ham~ton & Co. v. United States, 276 U.S. 

at 409 (discretion by President as to the amount of a tax). 

Indeed, in the year before section 157(b) was enacted, the 

Supreme Court upheld the imposition of license fees on importers 

on the basis of a statute authorizing the President to "take such 

action and for such'time, as he deems necessary to adjust the 

imports of [an] article and its derivatives." FEA v. Alqonquin 

SNG. Inc., 426 U.S. 548 (1976)- 
Court held that a duty on the transportation by vessel of persons 

who are not citizens of the United States was not "a tax or duty 

within the meaning of the Constitution." The Court stated that 

the statute related to the subject of immigration, was designed 

to regulate its evils, and was not intended to raise revenue for 

the general support of the government. See also Wickard v. 

Filburn, 317 U.S. 111 (1942). Lower courts have followed the 

Head Money Cases, holding that if "regulation is the primary 

purpose of a statute, revenue raised under the statute will be 

considered a fee rather than a tax." South Carolina v. Block, 

717 at 887 (provision authorizing Secretary of Agriculture to 

deduct a specified amount from the proceeds of milk sales to 

offset cost.of the price support program was not a tax because 

its primary purpose was regulatory); United States v. Stansland, 

242 F. 2d 843 (7th Cir. 1957) ; Rodsers v. United States, 138 F.2d 

992 (6th Cir, 1943). See also Brock v. Washinston Metropolitan 

Area Transit Authority, 796 F.2d 481, 488 (D.C. Cir. 1986, cert. 

denied, 481 U.S. 1013 (1987)) 

In sum, section 157(b) authorizes the Administrator to issue 

regulations to control dangerous substances. Auction and quota 

with fee rules that have as their primary purpose regulating or 

controlling such substances are not proscribed methods of control 

merely because revenue is also raised under these rules, Such 

revenue would merely be incidental to the primary purpose of 

controlling CFCs. 

The Independent Offices A~prouriations Act 

The IOAA provides authority for federal agencies.to impose 

fees an the recipients of services or things of value from the 

government. 31 U.S.C. 9701. The question we have been asked is 

whether the IOAA provides authority to the EPA to conduct the 

auction or to impose regulatory fees. In light of our conclusion 

that the Clean Air Act clearly authorizes the EPA to conduct an 

auction or to impose regulatory fees, we do not resolve this 

issue. We set forth a general discussion of the IOAA as .it 

relates to the regulatory mechanisms contemplated by EPA.29 As 

will be clear from our discussion, the extent to which EPA could 

rely on the IOAA for authority to conduct auctions or impose 

regulatory fees is a complex and close question. 

As an initial matter, we note that the IOAA alone cannot 

provide the full authority for the auction or quota with fee 

rules. Before EPA can impose charges for the allowances, it must 

first have the authority to create the allowances and make them 

transferable. It is the allowances, after all, that is the thing 

. . 

290ur reasons for declining to opine on IOAA in the 

abstract, apart from any statutory scheme, are set forth in 

footnote 1, suDra. 
of value which the agency is providing and for which it is 

entitled to charge. Thus, we assume in this section that a . 

system of allowances is established under other legal authority, 

and consider whether the IOAA provides authority for EPA to 

auction off the allowances or to charge fees of allowance 

recipients. 

The 10- provides: 

(a) It is the sense of Congress that each 

service or thing of value provided by an 

agency . . . to a person . . . is to be selfsustaining to the extent possible. 

(b) The head of each agency . . . may 

prescribe regulations establishing the charge 

for a service or thing of value provided by 

--agency, Rewlations prescribed by the -- ------- 

heads of executive agencies are sublect to 

policies prescribed by the President and 

shall be as uniform as practicable. Each 

charge shall be-- 

(1) fair; and 

(2) based on-- 

(A) the costs to the Government; 

(b) the value of the service or thing to the 

recipient; 

(c) public policy or interest served; and 

(d) other.relevant facts. 

31 U.S.C. 9701. Based on the language of the statute,30 it might 

be argued that an auction or regulatory fee might be justified as 

charges based on the value of an allowance to the recipient. 

As noted above, however, the Supreme Court in National Cable 

Television Assoc. v. U.S., 415 J.S. 336 (1974) and its companion 

case, FPC v. New Enaland Power Co., 415 U.S. 345 (1974), and the 

circuit courts have narrowed the IOAA to theoretically avoid 

constitutional problems concerning delegation. 

-- 

In National Cable Television, the Supreme Court held invalid 

~nde~~~f~~theimp~~i;ew---&ia~M~k

system (CATV) a fee of 30 cents per subscriber. The FCC had 

30~he original version of the IOAA (the Independent Offices 

Appropriation Act of 1952), see 65 Stat. 290 (1951), differed 

slightly in wording and structure from the existing statute. The 

changes made in 1982, however, were merely formal and not 

intended to alter the meaning. See H.R. Rep. No. 651, 97th 

Cong., 2d Sess. 226 (1982). 
determined the total cost for CATV regulation and then 

established a formula that would recover those costs. The Court 

stated, however, that the "value'to the recipient" standard 

should be "the measure of the fee." Because some of the costs of 

the regulation "inured to the benefit of the public," the entire 

cost could not be imposed on CATV systems consistent with 

charging the systems only for the value they received. 415 U.S. 

at 340-43. 

New Ensland Power involved an assessment, in proportion to 

wholesale sales and interchange of electricity, of the cost of 

administering the Federal Power Act with respect to 

Njurisdictional utilities. "31 The Court construed the IOAA in 

accordance with a Bureau of the Budget circular.32 The Court 

quoted the circular's statement that a reasonable charge "should 

be made to each identifiable recipient for a measurable unit or 

amount of Government service or property from which he derives a 

special benefit. 415 U.S. at 349 (quoting circular) (emphasis 

added by the Court). Further, "no charge should be made for 

services rendered, 'when the identification of the ultimate 

beneficiary is obscure and the service can be primarily 

considered as benef.itting (sic) broadly the general public.", 

415 U.S. at 350) (quoting circular) . Because some of the 

assessments were on companies that "had no proceedings before the 

[FPC] during the year in question," and apparently "neither asked 

for nor received-the Commissionfs servicesfn the assessments were 

not authorized by the IOAA. Id, at 351. 

Based on these cases in isolation, it might seem that an 

agency could impose charges based either on the cost to the 

agency or the value provided to the recipient. National Cable 

Television expressly stated -that the "value to the recipientN 

standard should be "the measure of the fee." Moreover, in 

limiting the reach of the statute, the Court specifically chose 

to deem not relevant "the words 'public policy or interest 

served, and other pertinent.facts,'" thereby suggesting that the 

two legitimate factors to consider were "cost to the Governmentu 

and "value to the recipient." 415 U.S. at 343. Finally, 

although the two Supreme Court cases involved fees based on . 

agency costs, that was simply the result of the agency's choice 

to set cost-based fees. If the agency had set fees on a value to 

31~atural gas companies were also required to pay fees. 

companies with operating revenues over $1,000,000 were charged a 

fee in proportion to their deliveries in interstate commerce of 

natural gas. Moreover, other natural gas companies were assessed 

a fee in proportion'to the new reserves of natural gas 

certificated each year. 

32~udget Circular No. A-25, September 23-,; 1959. 
the recipient standard,' the Court's analysis suggests that this 

too would have been legitimate. 

The circuit courts, however, have not adopted this 

interpretation of National Cable Television and New Enqland 

Power. Rather, beginning with National Cable Television v. FCC, 

554 F.2d 1094 (D.C. Cir. 1976), Electronic Industries Assoc. V. 

FCC, 554 F.2d 1109 (D.C. Cir. 1976), National Association of 

Broadcasters v. FCC, 554 F.2d 1118 (D.C. Cir. 1976) and Capital 

Cities Communications v. FCC, 554 F.2d 1135 (D.C. Cir. 1976), the 

circuit courts'have interpreted the IOAA to require agencies to 

base the charges on agency costs rather than some measure of the 

benefit received. Thus, in National Cable Television v. F.C.C, 

554 F.2d at 1106, the D.C. Circuit held that fees "should be a 

reasonable approximation of the attributable costs which the 

Commission identifies as being expended to benefit the 

recipient." The court elaborated: 

as we interpret [National Cable Television], 

the agency must look at the value which 

the regulated party may immediately or 

eventually derive from the regulatory scheme, 

but at the value of the direct and indirect 

sewices which the agency confers. This 

means, for example, that a fee, in order not 

to be a tax, cannot be justified by the 

revenues received or the profits [of the 

regulated parties], but must be reasonably 

related to those attributable direct and 

indirect costs which the agency actually 

incurs in regulating (servicing) the 

industry. 

- Id. at 1107, This interpretation of the IOAA has been followed 

or cited in several other circuit court decisions. See Central & 

Southern Motor Freisht Tariff Assoc., 777 F.2d 722 (D.C. Cir 

1985); Nevada ~ower Co. v. Watt, 711 F.2d 913, 933 (10th Cir. 

1983); M~SS~SS~DD~ Power & Lisht v. NRC, 601 F.2d 223, 230 (5th 

Cir, 1979), cert. denied, 444 U.S. 1102 (1980) .33 It should be 

331n Central & Southern Motor Freiaht ~ariff Assoc., 777 

F.2d 722, 730 (1985), the D.C. Circuit summarized the principles 

that govern the imposition of fees under the IOAA: 

. These general principles, enumerated in existing 

decisional law,taken together suggest that an agency 

may recover the full costs of providing a service when 

the following conditions are met: (I) the agency has 

'identified the specific agency activity or activities 

for which the fee is being assessed; (2) .the service 

(continued ...) 

- 2Q - 
noted, however, that one judge who participated in the original 

D.C. Circuit cases rejected the panel decision to limit fees to 

costs. See National Association of Broadcasters, 554 F.2d at 

1134 (concurring opinion). Judge Tam stated: 

*In light of this substantial diminution of 

agency discretion [by the Supreme Court] in 

setting "fair and equitable" fees, I do not 

believe that we should now attempt to limit 

further the applicable statutory standard by 

peremptorily defining "value to the 

recipient" as including only the costs and 

not also the value of the benefits bestowed 

on a regulatee. . . . [I]f an agency chooses 

a cost basis approach, as the FCC did in its 

1970 fee schedule . . . , it should be 

required to identify the specific items of 

cost and demonstrate how they are related to 

the benefits for which the fee is assessed. . . . I am not convinced that [National Cable 

Television, prohibits the Commission from 

developing a fee schedule through a measure 

of "value to the recipientn.that is not 

initially related to its costs. Thus, for 

example, the Commission by nllemaking could 

determine for each class of fees what factors 

best reflect the value of that 'benefit to the 

regulatee and then calculate a fee based on 

those criteria, 

Under Judge Tamm's interpretation of the statute, which in our 

judgment deserves serious consideration, an agency could charge 

fees on the basis of benefit to the recipient. In the present 

case, the EPA might be able to frame a measure of benefit to the 

recipient that would justify either the auction or the quota with 

fees. To justify the auction, the standard would be articulated 

as the value that the recipient derives from possession of the 

allowances. To justify the quota with fees, which are set at the 

amount of the windfalls received by firms, the standard could be 

articulated as the value that the recipient derives in light of 

the restriction in the number of legal allowances. In contrast, 

if the IOAA is interpreted to require cost-based fees, then the 

33 ( . . .continued) 

produces a special, private benefit; (3) the value of 

that private benefit is reasonably related to the fee; 

(4) the benefit accrues at least in part to an 

identifiable private beneficiary and not merely to the 

industry as a whole; and (5) the service in question 

produces no independent public benefit. 
maximum charge that EPA could impose would be linked to its costs 

in regulating CFCs. 

It is possible, that it is only the D.C. Circuit that has 

held that fees must be limited to costs rather than benefits. 

The decisions from the other circuits are less clear because they 

have arisen in the context of cost-.based fee schedules. See 

Nevada Power Co. v. Watt, 711 F.2d 913, 933 (10th Cir. 1983); 

Mississippi Power & Liqht v. NRC, 601 F.2d 223, 230 (5th ~ir. 

1979), cert. denied, 444 U.S. 1102 '(1980). Although one of these 

cases cites Electronic Industries Assoc. v. FCC, 554 F.2d 1109 

(D.C. Cir. 1976), for the proposition that "the fee assessed 

cannot exceed the cost to the agency of rendering the service," 

M~ss~ss~D~~ Power & Liqht, 601 F.2d at 230, it is not clear that 

the court intended to foreclose by that citation a benefit-based 

fee schedule. 

Even beyond circuit court interpretation, it is not entirely 

clear that the appropriate interpretation of the IOAA and 

National Cable ,Television would permit the auction or quota with 

fees. First, although the statute may permit benefits, rather 

than costs, to be used in measuring fees, the statute may 

nonetheless limit the total fees received for a thing of value to 

agency costs. The IOAA does not appear to authorize profitmaking by the government, but only the recovery of costs. Thus, 

section (a) of the IOAA provides that "It is the sense of 

Congress that each service or thing of value provided by an 

agency . . . to a person . . . is to be self-sustaining to the 

extent possible." Under this interpretation, EPA could base fees 

on the benefit received but the maximum fee would be limited by 

the costs to the agency of limiting CFCs. Second, even under a 

benefit-based measure of fees, agencies would still be required 

to charge for the actual benefit received by the regulatee, and 

therefore would be required, .for example, to exclude any 

independent public benefits from the measure of fees. Although 

we do not consider the issue further, we note the possibility 

that some portion of the CFC restriction might be argued to 

benefit the public rather than the industry. 3S 

34~hat the cases involve fees that are generally cost-based 

appears to be explained by the fact that the government has 

followed the D.C- Circuit decisions and that the Budget Circular 

imposes this requirement. See Budget Circular No. A-25, at 3 

("The maximum fee for a special service will be governed by its 

total cost and not by the value of the service to the 

recipient -") 

35~his question seems to depend on whether the program is 

analyzed as restricting CFCs or permitting firms to .produce CFCs. 

Under the former analysis, the-regulatees may .be said not to 

(continued ...) 

- 22 - 
Given the circuit court decisions that interpret the IOAA to 

require a cost-based measure of fees, and given the clear 

authority of EPA to promulgate an auction or quota with fee rule 

under the Clean Air Act, we do not believe it is necessary, at 

this point, to resolve this issue.36 We do note, however, that 

the Supreme Court in New Enqland Power relied upon the Bureau of 

the Budget's interpretation of the IOAA. If the decision were 

made to rely upon the authority of IOAA to impose fees greater 

than agency costs, it would be advisable for the Office of 

Management and Budget to adopt formally an interpretation of the 

statute that provides for such authority. Cf. Chevron v. Natural 

Resources Defense Council, Inc., 467 U.S. 837 (1984). 

35 ( . . . continued) 

benefit, while under the latter view, the regulatees are clearly 

receiving a "thing of value" from the government. To the extent 

that CFC's constitute under the law an environmental harm, and if 

there is no entitiernent to cause such harm without rectification, 

it can be reasonably argued that no part of the fee confers a 

pub1 ic benefit. 

36~e also do not address whether the allowances could be 

sold as a species of property. Although agencies are limited to 

costs when imposing fees regarding regulatory services, they may 

charge more than costs when property is sold. This view is 

adopted by the Budget Circular which provides "Where federally 

owned resources or property are leased or sold, a fair market 

value should be obtained . . . . Charges need not be limited to 

the recovery of costs; they may produce net revenues to the 

Government." Budget Circular No. A-25, at p. 2. Similarly, the' 

united States Court of Claims in Yosemite Park and Curry Co. v. 

United States, 686 F.2d 925 (Cl. Ct. 1982), held that the 

National Park Service could charge fees for electricity provided 

to a concessioner pursuant to contract based on rates charged by 

local electrical utilities. The court held that the principles 

.stated in the Supreme Court's decision in National Cable 

Television were not applicable to contracts, where the government 

acts as an owner of property rather than in its sovereign 

capacity. But it is not clear that the IOAA governs the sale of 

property. We note that the existing IOAA statute authorizes 

charges for "a service or thing of value provided by an agency," 

31 U.S.C. 9701, and that this language replaced language in the 

1952 statute, which provided for charges for "any work, service, 

publication, report, document, benefit, privilege, authority, 

use, franchise, license, permit, certificate, registration or 

similar thing of value or utility," but not property. 65 Stat. 

290 (1951). Beyond this, the context makes clear that the sale 

of allowances here is intended as a control, and thus, they are 

seemingly not sold in the government's role as owner but rather 

as sovereign. 
C. The Toxic Substances Control Act 

Another possible source of authority for the auction or 

quota with fee rules is section 6(a) of the Toxic Substances 

Control Act (TSCA) . Section 6 (a) provides: 

If the Administrator finds that there is a reasonable 

basis to conclude that the manufacture, processing, 

distribution in commerce [etc.]'of a chemical substance 

or mixture ...p resents ... an unreasonable risk of injury 

to health ... the Administrator shall by rule apply one 

or more of the following requirements to such substance 

or mixture to the'extent necessary to protect 

adequately against such risk using the least burdensome 

requirements: 

(5) A requirement prohibiting or otherwise regulating 

any manner or method of commercial use of such 

substance or mixture. 

TCSA also requires the Administrator to consider ,,the reasonably 

ascertainable economic consequences of the rule." 15 U.S.C. 

2605 (c) (1) (Dl 

TSCA, however, expresses a preference for regulatory action 

to be taken under alternative legal authority. Thus, section 

6 (c) provides: 

If the Administrator determines that a risk 

of injury to health or the environment could 

be eliminated or reduced to a sufficient 

extent by actions taken under another Federal 

la-w (or laws) administered in whole or in 

part by the Administrator, the Administrator 

may not promulgate a rule under subsection 

(a) of this section to protect against such 

risk of injury unless.the Administrator 

finds, in the Administrator's discretion, 

that it is in the public interest to protect 

against such risk under this chapter. In 

making such a finding the Administrator shall 

consider (i) all relevant aspects of the 

risk, as determined by the Administrator in 

the Administrator's discretion, (ii) a 

comparison of the estimated costs of 

.complying with actions taken under this 

chapter and under such law (or laws), and 

(iii) the relative efficiency of actions 

under this chapter and under such law (or 

laws) to protect against such risk of injury. 
See also 15 U.S.C. 2608 (expressing similar preference for 

regulation under other authority). 

In view of our determination that the auction and quota with 

fee rules are within the authority of the Administrator under the 

Clean Air Act, we do not believe it is necessary to discuss this 

issue further. ~egulation under TSCA would require a finding 

that it is in the public interest to issue the same rules under 

this statute rather than the Clean Air Act. Moreover, we believe 

many of the same arguments that support the Administrator's 

authority under the Clean Air Act also support his authority 

here. To the extent that the two statutes differ, we believe 

that the Administrator's authority is more secure under the Clean 

Air Act. 

Conclusion 

In conclusion, we find that the Administrator has authority 

under section 157(b) of the Clean Air Act to promulgate the 

auction or quota with fee rules. Because we have found 

authority under the Clean Air Act, it is unnecessary to resolve 

the question whether similar he IOAA or 

the TSCA. 

cc: Gerald H. Yamada 

Acting General Counsel 

Environmental Protection Agency